AUD/USD remains confined in a range below mid-0.6400s, moves little after RBA minutes

The AUD/USD pair extends its sideways consolidative price move during the Asian session on Tuesday and remains confined in a familiar trading range held over the past week or so. Spot prices hold steady around the 0.6435-0.6430 area and move little following the release of the Reserve Bank of Australia (RBA) September monetary policy meeting minutes.

The Australian central bank did consider raising rates by 25 bps, though the case to hold was stronger as the recent data did not materially alter the economic outlook. The minutes further revealed that the RBA remains ready to tighten further should inflation prove more persistent than expected. In the absence of fresh hawkish signals, the minutes do little to influence the Aussie or provide any meaningful impetus to the AUD/USD pair in the wake of speculations that the RBA might have already ended its rate-hiking cycle.

The US Dollar (USD), on the other hand, remains on the defensive below a six-month peak touched last week and is seen lending some support to the AUD/USD pair. Traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of this week's key central bank rate decisions, including the Federal Reserve (Fed). The US central bank is scheduled to announce the outcome of a two-day policy meeting on Wednesday and is widely anticipated to leave interest rates unchanged at 5.50%.

Investors, however, seem convinced that the Fed will stick to its hawkish stance and have been pricing in the possibility of one more 25 bps lift-off by the end of this year. Furthermore, the incoming resilient US macro data, along with still-sticky inflation, should allow the Fed to keep interest rates higher for longer. Hence, the focus will remain glued to the accompanying monetary policy statement. Apart from this, Fed Chair Jerome Powell's comments will be scrutinized for cues about the future rate-hike path.

This, in turn, will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair. In the meantime, hawkish Fed expectations remain supportive of elevated US Treasury bond yields and favour the USD bulls, suggesting that the path of least resistance for spot prices is to the downside. This, in turn, suggests that any meaningful appreciating move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Technical levels to watch